Improving acceptability towards ambitious carbon pricing policies : Problems and possible solutions

Abstract

In this thesis, we investigate why carbon pricing is not being optimally implemented, despite a rare consensus from economists stating that carbon pricing is the most efficient tool to fight climate change. We focus on the question of the acceptability for carbon pricing. Even though this topic has for a long time been left aside of carbon pricing discussions, a growing number of researchers are now starting to focus on this aspect. Indeed, many scientists have come to the conclusion that the implementation of ambitious policies highly depends on public acceptability. This also strongly applies to the field of environmental policies. After a detailed review of literature, we have found two important issues in carbon pricing policies, which may explain the low levels of acceptability. The first issue is its distributional consequences. Empirically, we have showed that there is yet no clear answer to whether a carbon tax is regressive or not. Still, many evidences seem to point to at least some level of regressivity. In order to increase people’s acceptability, we have found that redistributing revenues through green investments is the best option. This is a quite surprising and interesting result, because our intuition would have suggested redistributing revenues in a progressive manner (for instance lump-sum transfers). The second issue is people’s fear for competitiveness disadvantages, which could theoretically translate into carbon leakage. For this question, we can give a more precise answer: no empirical study has so far been able to show any significant evidence of carbon leakage. This clearly shows that opponents of carbon pricing have overplayed this issue. Even if carbon leakage was to become an issue in the future (possibly as carbon prices increase), some useful solutions have already been proposed, in particular Border Carbon Adjustments (BCA).